Over the past months, the following significant reforms have been made to Spanish law on direct taxation of individuals:
- On 28 December, Law 38/2022, of December 27, on the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments and creating the temporary solidarity tax on large fortunes and amending certain tax rules, was published in the Official State Gazette.
- This regulation creates the Temporary Solidarity Tax on Large Fortunes for the 2022 and 2023 tax periods. This tax is classified as a direct tax, personal and complementary to Wealth Tax, which is levied on individuals’ net wealth in excess of EUR 3,000,000 euros.
- This regulation has been extended to the individuals to which Wealth Tax applies. For tax period 2022 onwards, Wealth Tax applies to shareholdings when at least 50% of the total assets of the company consists, directly or indirectly, of Spanish real estate assets. For these purposes, the value of the real estate assets would not be the book value reported for accounting purposes by the company, but the value arising from specific Wealth Tax rules for real estate assets. This value would be the higher of the acquisition value, the cadastral value and any other value assessed by the tax authorities for tax purposes.
- On 24 December 2022 , Law 31/2022 of 23 December, was published in the Official State Gazette. The main measures contained in this Law that affect the taxation of individuals were the following:
- Extension of the excluding limits of the objective estimation method: The quantitative limits that have been applied in previous years and that delimit the scope of application of the objective estimation method for the economic activities included in the scope of application of said method, with the exception of agricultural, livestock, and forestry activities, which have their own quantitative limit by volume of income, are extended for fiscal year 2023.
- Personal income tax rates applicable to the savings tax base have been increased. Until December 31, 2022 the maximum rate was 26% and from January 1, 2023, for taxable income over EUR 200,000 the rate is 27% instead of 26% and a higher tax rate of 28% is created for taxable income over EUR 300,000 euros.
- On 22 December 2022, Law 28/2022, of December 21, on the promotion of the ecosystem of emerging companies was published in the Official State Gazette. This Law has modified the following tax regulations:
- As of January 1, 2023, a favourable tax treatment for the award of shares or stock options to start-up employees (according to the definitions established in the Law 28/2022) has been introduced: (1) The tax exemption is increased up to a maximum annual gross amount of EUR 50,000 per employee for start-up employees; (2) Deferred taxation for non-tax exempt income derived from the award of shares or stock options to start-up employees until certain events take place and; (3) Special valuation rule on the award of shares to start-up employees.
- As of January 1, 2023, this Law has improved the deduction for investment in new or recently created companies. In particular, the deduction is increased from 30% to 50% of the amounts paid for the purchase of shares in new or recently created companies. The maximum limit of the deduction is also increased from EUR 60,000 to EUR 100,000 euros. In general terms, the period for buying shares is increased to five years (previously it was 3 years) from the time of the company’s incorporation, and up to 7 years for certain categories of start-ups.
- As of January 1, 2023, tax regulation of carried interest has been introduced. It is established that carried interest will be classified as employment income and a favourable tax regime is approved based on the inclusion at 50% of the income obtained, provided that certain requirements are met.
- As of January 1, 2023, this Law has introduced modifications to the Special Regime for personal income tax purposes for workers posted to Spain. In particular, some of the requirements to be eligible for the regime have been relaxed and the circumstances under which individuals are eligible for the Special Regime have been extended. The main modifications are:
- Eligible individuals must not have been tax resident in Spain in the five tax periods prior to their posting to Spanish territory. Note that, until December 31, 2022, the Special Regime required a period of ten years.
- It is approved that the spouse or the child's parent and children under 25 years of age (or those of any age if they are legally considered disabled) may also opt for the application of the regime if they meet certain requirements.
- In addition, individuals posted to Spain whose work activity is performed remotely, through the exclusive use of computer, telematic and telecommunication means and systems, are also eligible for the regime.
- Individuals posted to Spain as a consequence of carrying out in Spain an economic activity classified as an entrepreneurial activity, in accordance with the procedure described in Article 70 of Law 14/2013, of 27 September, are also eligible for the regime.
- Individuals posted to Spain as a consequence of carrying out in Spain an economic activity as highly qualified professionals and who provide services to start-ups are also eligible for the regime.
- On 15 June 2022, Law 10/2022, of 14 June, on urgent measures to promote building renovation activity in the context of the Recovery, Transformation, and Resilience Plan, was published in the Official State Gazette. The main purpose of the law is to promote the renovation of inadequate housing and improve its energy rating. In this respect, the following are three temporary tax credits for personal income tax purposes (PIT) that may be applied to the amounts invested in the taxpayer’s main residence or the property leased to be used as a dwelling:
- A 20% tax credit is introduced for work that reduces demand for heating and cooling by at least 7%. The maximum base for this tax credit is EUR 5,000.
To qualify for this tax credit, the work must have been carried out between 6 October 2021 (date on which Royal Decree Law 19/2021, of 5 October, came into force) and 31 December 2022.
Properties that qualify for this tax credit will be the taxpayer's main residence or any other property owned by the taxpayer that is leased for use as a dwelling at that time or is expected to be leased, provided that, in the latter case, the property is leased before 31 December 2023.
- A 40% tax credit is introduced for work that reduces consumption of non-renewable primary energy by at least 30% or improves the energy rating of the taxpayer’s main residence to 'A' or 'B'. The maximum base for this tax credit is EUR 7,500. Work must be carried out in the same period as outlined above.
Properties that will qualify for this tax credit will be the taxpayer's main residence or any other property owned by the taxpayer that is leased for use as a dwelling at that time or is expected to be leased, provided that, in the latter case, the property is leased before 31 December 2023. Consumption reductions or energy rating improvements must be evidenced through the property’s energy efficiency certificate or an improvement in the property’s energy rating issued before 1 January 2023.
- A 60% tax credit is introduced for work that reduces the consumption of non-renewable primary energy by at least 30% or improves the energy rating to 'A' or 'B' of , predominantly residential buildings. The tax credit will amount to 60% of the amounts paid for the work carried out between 6 October 2021 and 31 December during the application period.
The maximum base for this tax credit will be EUR 5,000 per year. The amounts paid that are not deducted because the maximum deduction threshold is exceeded may be deducted, with the same limit, in the following four years. The accumulated deduction base may not, however, exceed EUR 15,000.